Uneven Results in North Carolina Indicate that New Nonprofit Hospital Rule Might Work

New Orleans A combination of factors has curbed some, but not all, of the appetite for nonprofit hospitals’ frenzy of legal actions against lower income families in North Carolina, giving hope that the new Affordable Care Act restrictions against draconian collection practices might actually be effective.

We have been following closely whether or not nonprofit hospitals are modifying their behavior around the country in the wake of the final IRS and Department of Treasury rules that will require them to be much more effective in allowing lower income families to access charity care at the peril of their own tax exemptions. Much of what we have seen while examining IRS form 990s, which the hospitals are required to file annually with the IRS, has not been encouraging given that all of these institutions have known this was coming since 2010 when Obamacare became law. The leisurely four years until the rules became finalized at the end of 2014 should have allowed mountains to be moved in normal behavior and now that we are entering the penalty phase, the battle lines are being formed.

North Carolina may become one of the more interesting ones. The passage of the Act and its amendments involving charity care prompted an investigation in 2012 by the states big newspapers, including the Charlotte Observer, in the biggest city uncovered 40,000 lawsuits that the state’s nonprofit hospital has filed to collect debts. The headlines led to a happy confluence of forces with the legislature passing a law restricting emergency collection practices much like the language in the federal statute. An updated review of the court records by the newspapers indicates that some hospitals have attempted to comply, others are scofflaws, and some cleaned up their act completely. On the whole that’s good news and a potential harbinger of good things to come for the rest of the country as well.

A recent story by Ames Anderson and David Raynor in the Charlotte Observer,

…found that lawsuits by the state’s hospitals dropped by more than 45 percent from 2010 through 2014 – from about 6,000 to 3,200. At Carolinas HealthCare System, the state’s largest hospital system, the drop has been even sharper. The Charlotte-based hospital system filed about 1,400 lawsuits against patients last year – roughly half the number it filed in 2010. One hospital, Iredell Memorial in Statesville, has stopped filing lawsuits against patients. In 2013, it was one of the state’s most litigious hospitals, filing about 270 bill-collection lawsuits. Last year, it filed none. Lawsuits have also slowed to a trickle at two other hospitals: High Point Regional Hospital, which has recently joined UNC Health Care, and Lexington Medical Center, owned by Wake Forest Baptist Health.

More than 3000 cases is still a lot, and 1400 in one year from the Carolinas HealthCare System is outrageous, but progress is progress, and now with a powerful stick coming into the hand of advocates and organizations in North Carolina that could threaten and remove the hospitals’ tax exempt status, we might see more hospitals devoting themselves to their nonprofit mission like Iredell Memorial.

This is clearly a fight, but seems increasingly like one that we can win.